In the latest episode of Money Metals Midweek Memo, host Mike Maharrey delves into the Federal Reserve's ever-changing stance on inflation, the reality behind rising consumer prices, and a seemingly unrelated but important development: the end of the US penny.
Through sharp analysis and historical comparisons, Maharrey explains why the government's monetary policy continues to erode the value of the dollar while reinforcing the importance of holding physical gold and silver.
Maharrey begins with a reference to Monty Python's famous Dead Parrot sketch, drawing a humorous but revealing analogy between the Federal Reserve's handling of inflation and the pet shop owner's refusal to admit that the bird was dead.
He notes that in 2022, Federal Reserve Chair Jerome Powell and other officials insisted that inflation was “transitory.” However, when consumer prices rose beyond expectations, the Federal Reserve was forced to change its tune. By mid-2023, officials hinted that inflation had been “overcome,” and markets reacted optimistically.
However, Maharrey reminds listeners that he repeatedly warned against this overly optimistic view, arguing that the Federal Reserve never did enough to fully contain inflation. As recent CPI (Consumer Price Index) data shows, inflation remains persistently high, proving that the supposed victory over rising prices was, itself, transitory.
Breaking down the CPI: price increases are hard to ignore
Reviewing the latest inflation data, Maharrey highlights several key figures from the December 2024 and January 2025 CPI reports:
Annual inflation rate (January 2025): 3.0%
December 2024 CPI: 2.9%
Monthly inflation peak (January 2025): 0.5% increase
December monthly increase: 0.4%
The steady rise in the CPI in recent months calls into question the idea that inflation is under control. Notably, the core CPI (which excludes volatile food and energy prices) rose 0.4% in January, bringing the annual core CPI to 3.3%, a level that has remained stubbornly high since mid-2024.
Despite these figures, Maharrey stresses that the official CPI underestimates real inflation. If the government had used the methodology of the 1970s, current inflation would be closer to 6% or higher, meaning that the cost of living is rising much faster than reported.
The Federal Reserve's dilemma: raise rates or cut them?
With inflation higher than expected, the Federal Reserve faces a difficult choice:
Raise interest rates further to combat inflation. Cut rates to ease pressure on the debt-laden economy.
So far, the Fed has taken a middle ground, pausing rate hikes but delaying planned cuts. Markets had initially anticipated rate reductions by March 2025, but the latest CPI report has pushed that expectation back to at least September.
Maharrey warns that while inflation data suggests rates should rise, the economy remains addicted to artificially low interest rates. Ultimately, he predicts that when financial markets begin to crack under pressure, the Fed will revert to its old playbook: cutting rates and injecting liquidity through quantitative easing (QE), which will lead to even higher inflation.
The death of the penny: a symbol of a worthless dollar
In a move that might seem trivial at first glance, former President Donald Trump recently announced the end of the US penny, citing the excessive cost of minting it. According to the US Mint, producing each penny now costs 3.69 cents, which will result in an annual loss of more than $85 million by 2024.
According to Maharrey, the real issue is not the penny itself, but what it represents. The decline in the value of low-denomination coins is a direct reflection of how inflation has eroded the purchasing power of the US dollar. It recalls a time when a single penny could buy several pieces of gum, whereas today, even a quarter barely covers the cost.
The US government has taken similar steps in the past to devalue its currency:
1982: Pennies were stripped of most of their copper and replaced with cheaper zinc.
1965: Silver was removed from quarters, dimes, and nickels, replacing them with base metals (scrap silver).
As inflation continues to erode the value of the dollar, Maharrey predicts that other small coins, such as the nickel, could also disappear soon.
The solution: gold and silver as sound currency
Maharrey closes the episode with a clear message: the best hedge against inflation and currency devaluation is physical gold and silver. Unlike fiat currency, which loses value over time, precious metals maintain purchasing power.
He points out that pre-1965 silver quarters (commonly known as junk silver quarters), which were once worth only 25 cents, now have a real value 23 times their face value due to their silver content. With analysts predicting that gold could exceed $3,000 per ounce by 2025, now is the time to secure real money before the next inflation-driven crisis unfolds.
For those interested in buying gold and silver, direct listeners to Money Metals Exchange, where they can buy online or speak with a precious metals specialist at 1-800-800-1865.
Final Thoughts
Money Metals' latest midweek memo highlights a sobering reality: inflation is far from under control, and the Federal Reserve's actions suggest deeper economic trouble ahead. Meanwhile, the government's decision to eliminate the penny is yet another sign of the dollar's ongoing devaluation.
As Maharrey warns, the best way to protect wealth is to own real assets (gold and silver) before the next financial storm hits.
Mike Maharrey, Money Metals